The recent ‘Finance for Nature’ workshop, hosted in Hanoi on the 4th of March, saw a gathering of policymakers, economists, environmental experts, and financial sector representatives. The primary agenda was exploring how natural capital could be stitched into macroeconomic decision-making and enhancing ecological finance in Vietnam.
This insightful event, co-organised by the Institute of Strategy and Policy on Agriculture and Environment, the University of Economics and Technology for Industries, Dragon Capital Vietnam, the United Nations Development Programme, and the United Nations Environment Programme (UNEP) World Conservation Monitoring Centre, exemplified a marvellous collaboration across sectors aimed at advancing ecological finance.
Workshop organisers unveiled a report featuring advanced economic-environmental modelling tools like the Integrated Economic-Environmental Modelling (IEEM) framework and the Global Trade Analysis Project–Integrated Valuation of Ecosystem Services and Trade (GTAP-InVEST) platform. This provided a solid backbone for including natural capital in policymaking.
Traditional macroeconomic models often rely on Computable General Equilibrium (CGE) analysis built on Social Accounting Matrices. They typically emphasise solely priced market transactions, overlooking ecosystem services such as water regulation and carbon sequestration, which get a zero value.
Within this updated framework, alongside traditional monetary transactions, physical flows like water use and biomass energy are noted. This ensures natural capital is treated as an economic asset that can depreciate, degrade, or even be restored over time.
The IEEM framework addresses such limitations by weaving data from the United Nations System of Environmental-Economic Accounting into the Social Accounting Matrix. It formulates an environmentally extended accounting framework.
The introduction of IEEM+ESM, combining spatially explicit land-use and ecosystem service models, is groundbreaking. Globally applied through GTAP-InVEST, this four-stage closed-loop system begins with the CGE model estimating land demand by ecological area.
When risks tied to land degradation and deforestation are quantified in debt risk assessments, borrowing costs adjust. Nations investing in ecosystem restoration might benefit from lower bond yields, promoting sustainable resource governance.
Significant time was dedicated to developing the carbon market and green taxonomy in Vietnam. Of note, the national Emissions Trading System under Decree 29/2026/ND-CP was heralded as an essential progression towards understanding emissions’ costs.
The pilot, spanning 2026 to 2028, will target sectors like thermal power and cement. Auction mechanisms will replace free allocations post-2029, fostering technological innovation and emission reductions directly at the source.
A crucial conclusion from the workshop was that integrating natural capital into financial systems heralds a structural shift in development beyond mere technical reform. Frameworks like IEEM and GTAP-InVEST quantifiably showcase the intrinsic link between economic activity and ecological systems.
The feedback loop effectively demonstrates that ecological degradation directly affects agricultural productivity, pushing up food prices, and threatening macroeconomic stability.
The report also examined innovative financial mechanisms to counter the disproportion in financial flows, which, according to the UNEP’s 2026 data, total around $7.3 trillion annually with a negative impact on nature. Investment in nature-based solutions is markedly lower at just $220 billion.
This stark 30:1 imbalance shows the financial system still heavily funds resource extraction, fossil fuels, and chemically intensive agriculture. Emerging financial instruments offer the chance to direct capital flows towards nature-positive outcomes.
Decision No.21/2025/QD-TTg on the Green Classification List sets technical benchmarks across renewable energy and organic agriculture. With standardised definitions, commercial banks can reduce legal risks with green credit and curtail greenwashing, enhancing market transparency.
Subsequently, ecosystem service models measure physical changes, such as carbon loss. These changes become productivity shocks, influencing the economic model, linking environmental impacts directly to economic outcomes.
